Personal Finance 101: Basic Things You Should Know

     I began my journey to financial literacy way back in 2013, the first time I met Chinkee Tan in one of the seminars in my alma mater.  Since then, I was enlightened on how money works and understand the importance of our mindset, goal-setting and many other factors to be aware of our finances and to achieve financial freedom. And now that I'm already working (#adulting101) I now fully understand why everyone should have one.

     So here are some of the "basic" things you must do/know to achieve financial independence:

1. Be aware of your personal finance: As the saying says, "Personal finance is as personal as it can get". It is unique to each and every one of us because we have different lifestyles. There is no golden rule on how we should budget our own hard-earned money. Though there are some tips or advice we can see online (such as the zero-based budgeting, 10-20-70 rule, 50-30-20 rule, envelope method, etc.) but these are just guidelines we can follow. For as long as you cover all your expenses and are not spending more of what you earn (avoiding debt) that is good enough.

Tip: I suggest that you track your daily/weekly expenses to see where you spend most of your money. You will be surprised by how expensive small things can be when you collect it all together on a weekly/monthly basis. You would like to eliminate these "small" unnecessary things.

2. Pay your debt. Be it big or small, whether you borrow it from friends or relatives, debt should be PAID. We must teach ourselves to pay for our debt. This will develop our discipline and mindset to let go of the things that we do not own. We, people, are naturally greedy but do not be enslaved by money. Debt might be inevitable but borrow "responsibly". 

3. Savings. After you pay your debt or while you're gradually paying your debt, you can start saving. It doesn't matter how big or small, the case here is that you save consistently and persistently. Develop the discipline of saving and make it a habit. In that manner, you will be able to save no matter what your salary/income is. 

     I personally put my savings to my bank account just to avoid spending it. Though saving is really important, the challenge here is if you can manage to keep it. The saying is true, "IT IS NOT YOUR SAVING THAT MAKES YOU RICH, IT IS YOUR SPENDING HABIT". I remember when I was in college, I used to save P100 a week from my allowance. I really do deposit it weekly. I go to the bank and deposit a hundred-peso bill, WEEKLY or else I might spend it. It goes on for years, I think. So my saving journey started with that hundred-peso bill weekly. Also, it is recommended that you have a goal/purpose whenever you save. In my case, I am currently building my Emergency Fund* (3 months salary). Of course, there are many more things you can consider as your goal such as travel, education, dreams, etc.

4. Educate yourself a.k.a "Investing in Yourself". Although this is the fourth one in my list, this is one of the most important and I just want to emphasize this before moving on to the next one which is INVESTING. You can educate yourself in various ways, either thru reading books/e-books and blogs, watching youtube or talking to a financial advisor. However, sometimes, we Filipinos have this "mentality" wherein we tend to study things when we are already into it. But this should not be the case. Remember that what we are trying to handle/manage is our hard-earned money. Another thing is to avoid engaging in scams or "get-rich-quick schemes". You must at least be able to distinguish scams to safe/secure/legit investments.

5. Investing. The road to financial freedom does not end with savings.  Though these two are equally important, each has its purpose**. Before investing, you should first know your goal; is it for retirement, protection, education, passive/extra income, etc. With this, you can determine what type of investment you are going into. Unfortunately, not all of us do this and end up frustrated, wasting time and money. That's why we must educate ourselves first. Your investment should always in accordance with your lifestyle and risk appetite.

     And the last but not the least,

6. Tithings. Give back to glorify His name. Besides, all these things belong to Him and nothing belongs to us. I personally believe that it does not necessarily need to be given to a certain church. Offer your tithes to Him by helping others generously. 

     So, these are some of the basic things you must know in achieving financial freedom. Tracking your expenses, paying your debt, savings, educating yourself, investing and tithing, make sure that you make it a habit. Success won't happen overnight. Stop poor mindset thinking who always find excuses and who does not help themselves. Time is of the essence. Time will never be perfect. Start now and good luck.

*Emergency fund is a type of saving worth 3 to 6 months of your salary/expenses and the purpose is that in case of emergency (e.g. hospitalization, lay-off, etc.) you have 3-6 months worth of salary/expenses that you can use right away. 
**Your money allotted for savings is your liquid asset (ready cash) you can use in case of emergency while your money allotted for investing is an income-generating asset that can make your money work for you. (Please be reminded that it has its own risk). 

Disclaimer: I am no professional financial advisor. I only give advice or share my thoughts base on my personal experience.